ETF Tracker Newsletter For November 18, 2016

Ulli ETF Tracker Contact

ETF Tracker StatSheet

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https://theetfbully.com/2016/11/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-11172016/

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Market Commentary

MAJOR INDEXES PULL BACK HEADING INTO THE WEEKEND

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[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

The post election bull market slowed down today, and the major indexes finished with slight losses. The dollar was on a tear again and extended its rally in part supported by Fed chief Yellen’s comments that boosted expectations (now at 83%) for a December rate hike.

Financials gained slightly and were followed by energy stocks, which were supported by an uptick in oil prices; oil vacillated in a wide range above and below its unchanged line but managed to eke out a +0.31% gain.

Interest rates continued their upward trend with the 10-year Treasury now yielding some 2.35%. Gold lost again but managed to bounce off its $1,200 level; at least for the time being. Healthcare led to the downside as uncertainty about the new administration’s policies need more clarification.

After the decent post election move, things seemed to slow down a bit as the rally lost some steam; nevertheless, the major indexes closed higher for the second week in a row. Whether this bullish theme can continue or not depends if Trump’s policies are simply rhetoric or if he can actually pass proposals to implement infrastructure spending along with the widely expected reduction in taxes.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 11/17/2016

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, November 17, 2016

TOC082516

Methodology/Use of this StatSheet:

  1. From the universe of over 1,800 ETFs, I have selected only those with a trading volume of over $5 million per day (HV ETFs), so that liquidity and a small bid/ask spread are assured.
  2. Trend Tracking Indexes (TTIs)

Buy or Sell decisions for Domestic and International ETFs (section 1 and 2), are made based on the respective TTI and its position either above or below its long-term M/A (Moving Average). A crossing of the trend line from below accompanied by some staying power above constitutes a “Buy” signal. Conversely, a clear break below the line constitutes a “Sell” signal. Additionally, I use a 7.5% trailing stop loss on all positions in these categories to control downside risk.

  1. All other investment arenas do not have a TTI and should be traded based on the position of the individual ETF relative to its own respective trend line (%M/A). That’s why those signals are referred to as a “Selective Buy.” In other words, if an ETF crosses its own trendline to the upside, a “Buy” signal is generated. Since these areas tend to be more volatile, I recommend a wider trailing sell stop of 7.5% -10% depending on your risk tolerance.

If you are unfamiliar with some of the terminology, please see Glossary of Terms and new subscriber information in section 9.

 

  1. DOMESTIC EQUITY ETFs: BUY — since 4/4/2016

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Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) is positioned above its long-term trend line (red) by +1.09% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Bond Yields Spike But Major Indexes Crawl Higher

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

Fed chief Yellen was in the spotlight during her congressional testimony at which time she pointed out that the election outcome has not changed the Fed’s plan for a rate increase “relatively soon” and absent any dramatic changes, a gradual pace of hikes thereafter.  Sounds like the same rhetoric we’ve heard all year long.

Living costs have not only surged the most since 2007, but also increased at a faster rate than the Fed’s mandated 2%, which means a hike in rates would sure be justifiable based on this matrix. Especially energy and the overall cost increases associated with housing/shelter rose by 3.5% year over year, hardly a negligible number.

Bond yields spiked again and, as Horseman Capital pointed out sharp yield spikes have preceded every major crisis in the past 20 years. Here’s the chart they are referring to:

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A Pause In The Post-Election Rally

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

It was a mixed day with the S&P meandering slightly below its unchanged line caused by Wall Street digesting a healthy dose of economic data points. Industrial production tanked again and has now contracted for the 14th straight month, which is its longest non-recessionary streak in 96 years. To look at it another way, this is the biggest 2-year decline since the middle of 2008.

At the same time mortgage applications crashed 30% to 10-month lows, which was not really a surprise considering that mortgage rates surged and approached 4%.

Given that, it came as a total surprise that the December Fed rate-hike odds are now near 100%. Yes, that is not a misprint; even deteriorating economic data don’t matter as the anticipated spending wave to be implemented by the new incoming Trump administration takes priority.

It sure does not make sense when looking at this chart, courtesy of ZH:

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Post Election Updraft Continues

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

The major indexes extended their post election really with the Nasdaq being the winner of the day with a gain of +1.10%. The Dow managed to again creep into record territory while the S&P added a solid +0.75%.

Energy stocks provided the fuel with oil racing ahead with a gain of +5.82% in anticipation of the scheduled OPEC meeting the end of the month. As we’ve seen in the past, there is much hope attached to the outcome of the OPECers, but it’s far from certain as to whether their jawboning results in actual production cuts.

Helping the mood on Wall Street were improved retail sales over recent months, which suggests that maybe more spending will cast a positive light on the holidays and provide a much needed boost to the economy and the next GDP reading.

After some devastating losses over the past few days, bonds finally closed up as yields pulled back, although I think that this is just the beginning of the bursting bond bubble.

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The Trump Pump Slows: Dow Inches Into Record Territory But Nasdaq Drops

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

It was a tale of different markets. While the DIA made a new all-time high, the Nasdaq dropped as the rotation continued out of tech into financials, industrials, energy and transportation, all being powered by expectations that Trump’s economic policies might be beneficial for those sectors.

The dollar surged as emerging markets got crushed and bond yields surged to their highest levels in months based on increased inflation expectations. What is concerning is the speed with which the yields have been rising, which could lead to a deeper fallout in the interest rate markets and subsequently affect equities negatively.

While this rise in yields has come from very depressed levels, improved domestic growth can only be achieved with a corresponding widening of the deficit and higher inflation causing investors to demand even higher yields (lower bond prices) due to the erosion of real returns, which could then turn into a never ending vicious cycle.

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